FISCAL POLICY-Some Thoughts :

Slide 4:

MUDASSIR IFTIKHAR
MB090-53

CLASSICAL ECONOMIST :

CLASSICAL ECONOMIST

JOHN MAYNARD KEYNES :

JOHN MAYNARD KEYNES to the classical economists Challenged

Government in the Economy :

Government in the Economy Nothing arouses as much controversy as the role of government in the economy.
Government can affect the macroeconomy through two policy channels:
Fiscal policy
Monetary policy

Fiscal Policy :

Fiscal Policy

Overview :

Overview The government has four primary objectives when it intervenes in the macro economy:
Promote full employment (high employment)
Promote price stability (low inflation)
Promote Economic Growth
Promote the Stability of Financial Markets

Fiscal Policy :

Fiscal Policy The use of government spending and taxation to promote economy

According to Semuelson:“Fiscal policy is concerned with all those activities which are adopted by the government to collect revenues and make the expenditures so that economic stability could be attained without inflation and deflation” :

According to Semuelson:“Fiscal policy is concerned with all those activities which are adopted by the government to collect revenues and make the expenditures so that economic stability could be attained without inflation and deflation”

Neutral Fiscal policy :

Expansionary Fiscal policy :

Expansionary Fiscal policy G > T
T G

Contractionary Fiscal policy :

Contractionary Fiscal policy G < T
T G

The Budget Deficit :

The Budget Deficit A government’s budget deficit is the difference between what it spends (G) and what it collects in taxes (T) in a given period: With Expasionary fiscal policy
With Contractionary fiscal policy

Slide 24:

MUHAMMAD USMAN
MB-09-036

INSTRUMENTS OF FISCAL POLICY :

INSTRUMENTS OF FISCAL POLICY PUBLIC EXPENDITURES.
TAXES.
PUBLIC DEBTS.

1ST INSTRUMENT PUBLIC EXPENDITURES :

1ST INSTRUMENT PUBLIC EXPENDITURES 1. Government purchases of goods and services for current use.
2.Government purchases of goods and services intended to create future benefits.
3. Government expenditures that are not purchases of goods and services, and instead just represent transfers of money, such as social security payments.

Comparison of Fiscal Policy of Pakistan with :

Fiscal Policy of Australia :

Fiscal Policy of China :

Fiscal Policy of China 8% growth current year
€464 billion for domestic consumption
Still growing

India & PakistanA Comparison :

India & PakistanA Comparison

Common Successes Shared by Both Countries :

Common Successes Shared by Both Countries Doubling their per capita incomes
Lowering poverty (defined as $1 per day)
Improved food production
Food self-sufficiency

Common failures of both the countries :

Common failures of both the countries Wasteful expenditures of resources
Issuance of licenses to inefficient private sector
Pre-planned allocation of resources
Poor judicial system
Lack of transparency in decision making

Common failures of both the countries (cont’d) :

Common failures of both the countries (cont’d) Non-productive expenditures
Low check and balance
Large domestic borrowing
Heavy defense expenditures
Fragile banking system

The areas where India has surpassed Pakistan :

The areas where India has surpassed Pakistan Scientific and technological development
Defense technology
Space search
Electronics

The areas where India has surpassed Pakistan (cont’d) :

The areas where India has surpassed Pakistan (cont’d) Telecommunication
Population rate
Health access

The areas where Pakistan has surpassed India :

The areas where Pakistan has surpassed India Higher economic growth
High per capita income
Strong export growth
Less poverty